Calculates the clean price and can also return various risk statistics.

IRO Types

Interest Rate Callable and Puttable Bonds.

Function Parameters

Parameters

Description

Parameter Type

Restrictions

.

ValueDate

Valuation date of the bond option.

Date

OptionType

Call or Put

Enumerated Constant

1 - Call2 - Put

ExerciseType

European, Bermudan or American.

Enumerated Constant

1 - European2 - American3 - Bermudan

ExerciseSchedule

Lists exercise dates and the termination fee associated with each date. For European options, only the last date is used. For American options, every date between the first and last is assumed to be a valid exercise date.

Curve

Volatility

Annualised volatility of the underlying term structure, expressed as a decimal.

Double or Curve

Volatility >0%If entered as a curve, the volatility at the value date will be used to construct the term structure.

StepsPerCoupon

Determines the number of steps used to construct the lattice. The total number of branches in the lattice is also related to the number of coupon periods outstanding between the valuation date and the maturity date of the underlying bond.

Long

Steps per Coupon > 0

BondDated

The original issue date of the bond.

Date

BondMaturity

The maturity date of the bond.

Date

BondStubDates

Only needed if the bond has an odd first or last period.

Array of Dates

First Coupon Date: Date that the first coupon is paid (if bond does not have an odd first period, leave blank).

F.C.D > BondDatedF.C.D < P.C.DF.C.D < BondMaturity

Penultimate Coupon Date: Date that the penultimate coupon is paid (if bond does not have an odd last period, leave blank).

P.C.D > Bond DatedP.C.D > F.C.DP.C.D < BondMaturity

Notional

The face value of the bond. Assumed to be fixed for the life of the bond. This means that amortizing and accreting bonds are not supported.

As for straight bonds, accrued interest is computed based on the selected accrual basis and is independent from the valuation model being used.

Dirty Price

This is the price determined directly from the constructed interest rate lattice.

Modified Duration

For bonds with embedded options, this measure is often referred to as effective duration.

Modified Convexity

For bonds with embedded options, this measure is often referred to as effective convexity.

Theta

Defined as the sensitivity of option value with respect to an increase in time (reduction in time to maturity). This is estimated by revaluing the option with the valuation date incremented by one day.

PVBP

Measures the impact on bond price of a basis point increase in the entire yield curve.